Laffans Petrochemicals Ltd Management Discussions

(a) Industry structure and development

The Company is engaged in the wholesale trading of specialty chemicals and commodities through its network of distributors and also undertakes activities in Leasing and Rental Services. During the year under review, the

Company intensified its focus on expanding its product offerings and market presence across these sectors, striving to enhance its market share in a highly competitive environment.

(b) Discussion on financial performance and operational performance.

The Company operates in a single business segment, namely the trading of chemicals, and its financial results reflect the dynamics of this segment. During the financial year 2024 25, the Company reported a total income of 1,384.05 lakhs, slightly lower than 1,413.82 lakhs achieved in the previous year. The profit for the year stood at 200.39 lakhs compared to 260.43 lakhs in the prior year.

This decline in revenue and profitability was primarily driven by intensified competition in the chemical trading industry, coupled with fluctuating market demand and pricing pressures. The Companys focus on maintaining competitive pricing, managing costs, and optimizing operational efficiencies helped to partially offset the impact of these challenges.

The Companys solid financial foundation is reflected in its strong share capital of800.00 Lakhs and healthy reserves and surplus of 5,561.91 lakhs as of March 31, 2025, which provides adequate cushion for future growth initiatives and business sustainability.

Looking forward, the Company is committed to strengthening its market position by expanding product offerings, enhancing supplier relationships, and exploring new opportunities to improve profitability and shareholder value.

(c) Internal control system and their adequacy

The Company has established adequate internal control procedures, commensurate with its size and nature of business, for the purchase of raw materials and fixed assets, as well as for the sale of goods, respectively.

These controls ensure proper authorization, timely recording, and safeguarding of assets, thereby enhancing operational efficiency and minimizing risks of errors or irregularities.

(d) Material developments in Human Resources / Industrial Relations front including no of people employed

The Company has always regarded its human resources as the cornerstone of its progress and success, recognizing employees as its most valuable assets. The management firmly believes that the sustained growth of the Company is a direct result of the dedicated and continuous contributions of its workforce. With a balanced mix of skilled and semi-skilled personnel, the Company continually strives to enhance their skills, productivity, and overall capabilities.

A supportive and congenial work environment is maintained to foster employee engagement and well-being. The Company is deeply committed to ongoing improvement in social standards, business ethics, and employee welfare, reflecting its dedication to growing as a responsible and ethical organization.

We strongly believe that harmony among employees, employers, and the business community is vital for socio-economic development. During the year under review, industrial relations remained cordial and stable, contributing positively to the Companys overall performance and workplace culture.

(e) Risk and concerns

The Company primarily relies on importing chemicals from Gulf countries to meet its trading requirements.

However, the transit period for these imports often exceeds 30 days, which exposes the Company to significant market price fluctuations by the time the goods reach India. During the last financial year, frequent price volumes. As a result, the Company volatilityintheglobalchemical markets affected adopted a cautious stance and limited its imports to mitigate risks associated with unpredictable price changes.

Due to these uncertainties, the Company refrains from entering into long-term supply contracts, preferring short-term or spot purchases that provide greater flexibility in response to changing market conditions. This approach helps the Company manage inventory costs more effectively and avoid being locked into unfavorable pricing. Although this limits the ability to secure bulk purchase discounts or long-term price stability, it safeguards the Company from potential losses due to rapid market shifts.

Moving forward, the Company will continue to monitor international logistics and pricing trends closely and explore alternative sourcing options to enhance supply chain resilience and minimize exposure to transit-related risks.

(f) Opportunities and Threats

The Indian chemical industry, particularly the specialty chemicals segment, continues to present robust growth opportunities, driven by increasing domestic demand, supportive government policies, and the positive impact of the GST regime. The Company is not dependent on any single product type and remains committed to expanding its product portfolio based on evolving local market demand. During the year under review, the

Company has identified and initiated exclusive agency arrangements with several reputed Chinese firms to represent them in India, thereby strengthening its sourcing capabilities and competitive positioning.

Additionally, the wholesale trading of specialty chemicals and commodities, along with Leasing and Rental

Services-related activities, offers diversified growth avenues. The Company has been consistently executing major orders from reputed clients while undertaking cost reduction measures, which are expected to improve overall profitability in the current financial year.

However, the business is exposed to certain external risks such as raw material price volatility, foreign exchange fluctuations, regulatory changes, and global supply chain disruptions. Moreover, reliance on international suppliers, particularly from China, may lead to uncertainties stemming from geopolitical and trade policy developments.

The Board believes that with its strategic focus, strong distributor network, and proactive risk mitigation initiatives, the Company is well-equipped to navigate these challenges and continue its growth trajectory.

(g) OUTLOOK

The Company remains cautiously optimistic about its performance in the upcoming financial year. While the trading environment for chemicals continues to be competitive, the Company aims to strengthen its market position through strategic sourcing, expansion of product offerings, and enhanced customer engagement

With growing demand in end-user industries such as agrochemicals, textiles, pharmaceuticals, and personal care, the Company anticipates stable demand for specialty and industrial chemicals. The management is also exploring opportunities to expand its supplier network, including international agency collaborations, to improve product availability and pricing efficiency.

Overall, barring unforeseen circumstances, the Company expects to maintain stable performance and gradually improve profitability in FY 2025 26.

(h) DETAIL OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

In the financial year 2024 25, the Company did not experience any significant variations defined as changes of 25% or more in its key financial ratios compared to the previous year. Ratios including Debtors Turnover, Inventory Turnover, Interest Coverage Ratio, Current Ratio, Debt Equity Ratio, Operating Profit Margin (%), and Net Profit Margin (%) remained largely consistent.

This stability highlights the Companys steady operational performance and prudent financial management amid a competitive market environment.

(i) Change in Return on Net Worth Compared to Previous Year

During the financial year 2024 25, the Companys Return on Net Worth (RONW) witnessed a decline compared to the immediately previous financial year. This decrease is primarily attributed to the reduction in net profit for the year, which stood at 200.39 lakhs as against 260.43 lakhs in the previous year, despite the net worth remaining relatively stable.

The dip in profitability was mainly due to heightened competition, fluctuations in market demand, and pricing pressures within the chemical trading segment. These factors impacted the Companys revenue and margins, thereby influencing the overall return generated on shareholders equity.

The Company continues to focus on improving operational efficiencies, cost optimization, and exploring new business opportunities to enhance profitability and thereby improve the Return on Net Worth in the coming years.